Unable to dissolve faces of a subdivided mesh (e.g. cloth) after deforming it
The limited dissolve will "reduce detail on planar faces and linear edges" - that is if you have a flat plane made up of 100 faces, limited dissolve will merge them into one face but if the plane is bent in the middle it will reduce it to two faces. For a mesh that has been deformed by the cloth simulation you will find almost every face is at an angle to the face next to it so limited dissolve is not likely to simplify the geometry very much.

If you want to reduce the geometry of your deformed mesh then you will want to try something like the decimate modifier or the remesh modifier that allows you to generate a similarly shaped mesh with less geometry.

From your comment it sounds like you want to use a simple mesh to quickly get a rough shape and then add more detail to be used in the simulation to get the final cloth shape that you want. To do this, start with a low res mesh, add the cloth sim and let it play through for a while, then apply the cloth modifier, subdivide and repeat. You could also model or sculpt a mesh close to the final shape that you want and then add a cloth sim to that.